Ship finance and the Ship building industry · China Exim* Unicredit SMBC* Bremer Landesbank...

presented by

Ted Petropoulos HEAD

PETROFIN RESEARCH

Newsfront/Naftiliaki Conference

6th April 2011

Ship finance and the Ship building industry

-The symbiosis of shipbuilding and ship finance

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A. Shipbuilding and ship finance considerations

Ship finance considerations for private and public companies

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Taking a risk with post delivery finance

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- The total fleet order book

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B. The demand for newbuilding finance

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Order book

Delivery year World Merchant Fleet Number of vessels

2011

Total fleet 3016 Bulkers 1340 Tankers 207 Others 1469

2012

Total fleet 1654 Bulk Carriers 895

Tankers 121 Others 638

2013

Total fleet 458 Bulk Carriers 229

Tankers 53 Others 176

Overall total n/b orders 2011-2013 5128

Source: Clarksons - October 2010


Conversions / cancellations; some estimates

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Additional newbuilding orders

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Can the demand for newbuilding finance be accommodated?

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2011 2012 2013

orders 3016 1654 458

cancellations 15% 452 15% 248 10% 46

conversions 20% 603 15% 248 10% 46

additional orders 1000

Total newbuildings to be financed 1961 1158 1667

amounting to 4786 vessels

Assuming average unit price of $30m $35m

Total required (3 years) $143.58bn $167.51bn

Assuming 60% finance $86.148bn $100.51bn

Assuming 10% loan runoff on $420bn drawn global portfolios x3 years= $126bn

Second hand finance and other requirements

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2nd hand sales

From 10/1/2010-9/1/2011 $20.240bn

Number of vessels 830

Average price of vessel $24.38million

Source: www.gmoundreas.gr

We project for 2011 – 2013 a further $50bn for

a ) second-hand finance

b)mergers and acquisitions

c) additional net finance due to refinancings

d) additional shipping finance raised for shipping purposes based on additional non-shipping assets

In summary, we anticipate organic additional finance requirements of approx. $50bn over the 3-year period

Consequently, the total ship finance requirements for both newbuildings and organic shipping finance is expected to exceed the loan runoffs by $10 to $24.5bn over the 3-year period

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In the following Graph we show the loan portfolio of the top 40 banks

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C. The supply of ship finance

Ship finance based on data up to November 2010 – in $bn

• Total loans of leading 40 ship finance banks approximately $449.76bn

• Top 6 Banks Finance approx. 39.88% of Shipping Loans

Bank Lending to Shipping

49.000

35.480

33.600

22.600

20.300

18.400

18.000

17.000

16.900

16.000

13.900

13.200

13.100

13.000

13.000

11.400

10.000

9.800

9.200

8.600

8.500

8.000

8.000

8.000

6.100

5.000

5.000

4.800

4.700

4.500

3.220

3.000

3.000

3.000

2.680

2.620

2.450

1.810

1.500

1.400

HSH Nordbak

DNB Nor

Commerzbank/Deutsche Schiffsbank

RBS

KfW

Nordea

BNP PARIBAS / Fortis Belgium

BTMU*

Lloyds Banking Group

Credit Suisse*

Credit Agricole CIB

Bank of China*

DVB

HSBC*

China Exim*

Unicredit

SMBC*

Bremer Landesbank

Deutsche Bank

Danish Ship Finance

Korea Exim*

Citibank

Danske Bank/Focus Bank

Nord LB

SEB

ABN Amro

ING

Natixis

ICBC

Santander*

National Bank of Greece

NIBC

Swedbank

Helaba

Alpha bank

Emporiki Bank

Marfin Egnatia

Piraeus Bank*

JP Morgan

Bank of Ireland

Source: Petrofin Bank Research ©/ Marine Money

November 2010

* Market estimates

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Global ship finance exposure – asymmetrical distribution


Total top banks’ portfolio: US$449.76bn

$373.86

$9.50

$66.40

Top 40 banks’ portfolios according to geographical location – in US$bn

Europe USA Far EastPETROFIN RESEARCH

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April 2011

USA

Europe

Far East

Graph 2

$53.86

$36.70

$13.00

$154.44

$12.78

$82.58

$20.50

European ship finance portfolios - 32 banks

UK and Ireland France and Belgium Holland Germany

Greece Scandinavia Other European

Germany

Scandinavia France and Belgium

UK and Ireland

Holland

Greece

Other

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January 2011

Graph 3

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

2007 2008 2009 2010

3.89% 5.31%

6.42%

14.76%

44.25% 42.44% 42.59%

32.55%

Far Eastern ship finance German ship finance

January 2011

Graph 5

German vs Far Eastern ship finance PETROFIN RESEARCH

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Total Far Eastern portfolio: $48.9bn

$30.90

$27.00

$8.50

Far Eastern ship finance portfolios-6 banks

China Japan Korea

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Japan

Korea

January 2011

Graph 4

China

Trends and expectations over the next 3 years

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Attitude to newbuilding finance versus used vessel finance

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Capacity considerations: New banks in the horizon?

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Other providers of debt and equity; alternative finance, private capital, the role of public companies.

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Listed Companies - as of January 2011

from Newsfront GSI - 1st April 2011

1 Aegean Marine US 15 Goldenport UK

2 Baltic Trading (BALT) US 16 Hellenic Carriers UK

3 Capital Product US 17 Navios Holdings US

4 Costamare Inc US 18 Navios Marit Acquis US

5 Crude Carriers US 19 Navios Marit Partners US

6 Diana Shipping US 20 Newlead Holdings US

7 Dry Ships (DRYS) US 21 Oceanfreight US

8 Eagle Bulk Shipping US 22 Omega Navigation US

9 Euroseas Ltd US 23 OSG Ship Mngt (GR) US

10 Excel Maritime US 24 Paragon Shipping US

11 Freeseas US 25 Safe Bulkers US

12 Genco Ship & Trading US 26 Seanergy Maritime US

13 Genmar US 27 Star Bulk Carriers US

14 Globus Maritime US 28 Stealthgas US

29 TEN US

30 Top Ships US

31 Torm US


Selected Shipping Funds

Summary Asset Types / Investment Strategy Capital

Argonaut

Strategy is to have exposure in the bulker, tanker, offshore/supply, LNG, LPG and cruise sectors. Financial

institutions have provided the fund with three times leverage

Aim is to trade in spreads between shipping equities in a way that will avoid large swings on returns

50% in U.S.-listed entities, 30% in European shipping companies

and another 20% in Asia-listed owners

Start-up capital is expected to reach

$50 million and the fund plans to

exceed $100 million

Oceanic Hedge

Fund

Invests in shipping, oil services and energy equities as well as the associated freight forward agreements

and commodities

Recently acquired 9 AHTS, 2 aframax tankers, 2 1,700-teu boxships and 1 supramax bulker from Allocean

in co-operation with SIF Limited

OHF takes long and short positions in equity instruments and derivatives

Long/Short Equity

– Tanker, container, cruise, dry cargo shipping, industrial

shipping, shipbuilding, energy and oil services sectors

Assets under management of

c. $1 billion

Raised $77 million (sought to raise $200 million), with $20 million contributed by Clarksons

Assets under management as at 31 December 2008 were US$161 million (31 December 2007: US$168

million)

Redemptions have decreased assets under management to US$54 million as at 1 March 2009

Invests in shares of shipping companies and freight derivatives in

the dry bulk and tanker markets

Assets under management of $54

million

Okeanos Shipping Fund Shipping hedge fund backed by German based Aquila Capital

The German-based freight consultant, HF Navigator, acts as an investment advisor to the fund

Fund’s primary strategy is to employ directional trading of forward

freight agreements, with an emphasis on short-term trading N/A

Castalia Springs Shipping hedge fund backed by Castalia Partners

Fund managed by Philippe van den Abeele (formerly from Clarksons freight derivatives brokerage arm) Focus purely on FFA trading N/A

Sea Advisors Fund

Shipping focused hedge fund set up in 2009

The fund’s equities desk is headed by John Kartsonas, formerly the senior shipping analyst at Citigroup

Investment Research

The freight derivatives desk is headed by Pavlos Hitiroglou, formerly the senior FFA trader at Navios

Holdings

Trade in freight derivatives and shipping equities N/A

M2M Global

Maritime Assets

Fund targeting distressed asset acquisition opportunities

M2M’s third fund, in the process of raising capital

The two other funds are Global Maritime Investments and Global Maritime Futures

Focus on dry bulk vessels, particularly handysize segment Target $250 million

SFS Group & Kuwait Finance

House

Shariah-compliant shipping fund with the aim of raising $150 million to invest in modern tonnage

The fund will be established through a limited partnership in the Cayman Islands before the end of 2009

Invest directly in high quality and modern vessels to be chartered

out on long-term contracts

Preference for offshore tonnage such as offshore supply vessels

and platform supply vessels

Target $150 million

Private open ended fund incorporated in Luxembourg on April 18th of 2007 to invest in the shipping

industry

7 years plus 2 year structure

Key parameters: target return 15% p.a. with a minimum investment $0.25 million

All vessel classes and sizes contemplated (initial fleet 2

supramax bulkers, 2 capesize newbuildings) Target $50 – 100 million

Distressed shipping assets fund

Oceanbulk Shipping of Greece is rumoured to have committed $10 million Focus on acquiring dry bulkers and containerships Target $400 million

Tsakos Fund for acquisition of shipping assets

Credit Suisse involved Not disclosed N/A

/ Alterna Rumoured to have teamed up with an undisclosed Greek shipbroking firm Target distressed ship sales N/A

Private equity fund intended for ship acquisitions

Targeting Asian and Indian investors Not disclosed $750 million

Vilmaris

Shipping fund backed by Hamburg based Komrowski Shipping

Listed on Hamburg Stock Exchange 26 June 2009

Aim to operate as a conventional shipping company by both buying and chartering-in vessels

Focus on containerships and dry bulkers

Aim to own eight vessels by the end of 2009

Raised $42 million in an IPO on the

Hamuburg Stock Exchange

Manages 3 closed funds; Horizon Global Shipping Funds I and II (HGSF I&II) and Courtney Fynn

– HGSF I&II currently has 9 bunkering tankers (four built, of which two have been sold, plus five newbuilds

delivering 2009-2010) and 4 chemical tankers under construction, delivering 2008 - 2011

– Courtney Fynn currently has 5 bitumen tankers under construction for delivery in 2009/10

Focus on niche vessel classes

HGSF I&II: over $50 million invested

per fund

Courtney Fynn: $500 million invested

UK based shipping fund

Actively manages the ships in their portfolio

Focuses on acquiring modern, 'generic' ships, i.e. standard bulk-

carriers, tankers, and containerships N/A

Eq

uity F

ocu

se

d F

un

ds

Asse

t F

ocu

se

d F

un

ds

Influencing factors: capital adequacy, Basel III, liquidity, risk

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31.19%

17.34%

21.24%

36.13%

47.57% 46.64%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

DATA based on 2009 DATA based on 2010 DATA based on 2009 DATA based on 2010 DATA based on 2009 DATA based on 2010

Banks with lending capacity

Banks with reduced capacity Banks with neutral/unclear

policy/capacity

16 banks

12 banks

4 banks

12 banks

22 banks

18 banks

Ship finance banks capacity 2009 Global portfolio, top 42 banks: $463.75bn 2010 Global portfolio, top 42 banks: $436.93bn

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Table 1

Greek ship finance – presenting the latest Petrofin Bank Research as of end 2010, released April 2011

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D. Greek ship finance capacity

* Market estimate

All

ban

ks f

inan

cin

g G

reek

sh

ipp

ing

in U

Sm

$0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000

Royal Bank of Scotland

Deutsche Schiffsbank

Credit Suisse*

HSH Nordbank*

National Bank of Greece

DNB Nor

Emporiki Bank

DB - Deutsche shipping

Marfin Egnatia

Alpha Bank

HSBC

BNP Paribas

DVB

Calyon*

Piraeus Bank*

Unicredit

EFG Eurobank

LBG Shipping Finance

Nordea

Citibank

Bremer Landesbank

First Business Bank

Nord LB

CHINA EXIM*

KFW*

Natixis

ING

KEXIM*

Bank of Cyprus

ABN AMRO (Fortis Bank Netherlands)

Aegean Baltic

Proton Bank

Beremberg*

Bank of Ireland

Deka*

Tbank - ex Aspis Bank

Agricultural Bank of Greece

Santander (ex Alliance and Leicester)

Corner*

$11,288

$5,007

$3,500

$2,881

$2,545

$2,297

$2,126

$2,439

$2,181

$2,120

$1,900

$1,980

$2,080

$1,500

$1,870

$1,701

$1,211

$1,272

$1,050

$780

$449

$663

$525

$500

$333

$442

$402

$200

$360

$304

$291

$202

$200

$161

$100

$81

$66

$50

$25

$1,151

$549

$1,000

$241

$459

$580

$604

$174

$302

$350

$400

$264

$94

$500

$130

$183

$199 $89

$300

$160

$454

$25

$162

$150 $225

$16

$0

$200

$16

$42

$36

$18

$50

$30

Drawn Loans Committed but undrawn loans

Total exposure to Greek shipping: $66.235bn

Total Banks: 39

Petrofin Bank Research© April 2011

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Analysis of the ship finance market

December

2001 December

2002 December

2003 December

2004 December

2005 December

2006 December

2007 December

2008 December

2009 December

2010

Growth

percentage 28.66% 20.19% 26.61% 11.62% 28.45% 44.31% 9.39% -8.478% -1.17%

Total

Greek

Shipping

Portfolio

$16,525m $21,261m $25,554m 32,353m $36,112m $46,387m $66,941m $73,228m $67,020m $66,235m

Petrofin Bank Research © - April 2011

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Analysis of the ship finance market

Petrofin Bank

Research ©

April 2011

Overall Greek

ship lending

portfolio as of end

2010

Overall Greek

ship lending

portfolio as of end

2009

Overall Greek

ship lending

portfolio as of end

2008

Percentage of

growth between

December 2009

and December

2010

Percentage of

growth between

December 2008

and December

2009

Percentage of

growth between

December 2001

and December

2010

Average yearly

growth since 2001

International

Banks WITH

a Greek

presence

$35,882.29 $36,777.31 $38,984.4 -2.43% -5.66% 408.97%

(Between 2001 and

2009: 421.66%)

19.82% (Between 2001 and

2009: 22.93%)

International

Banks

WITHOUT a

Greek

presence

$14,468.76 $14,101.65 $17.299.5 +2.60% -18.49% 134.69%

(Between 2001 and

2009: 128.74%)


2009: 10.9%)

Greek banks $15,883.60 $16,140.55 $16,944.24 -1.59% -4.74% 379.87%

(Between 2001 and

2009: 387.63%)


2009: 21.9%)

Total $66,234.65 $67,019.51 $73,228.14 -1.17% -8.48% 300.81%

(Between 2001 and

2009: 305.56%)


2009: 19.13%)

Petrofin Bank Research © - April 2011

Bank capacity in financing Greek shipping

November 2009: 35 banks February 2010: 40 banks Autumn 2010: 39 banks

Totals 2009: $73.2bn Totals 2010: $67.02bn Totals end 2010: $66.23bn

April 2011 PETROFIN RESEARCH

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end 2010: 39 banks

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

33.25% 39.33%

28.45%

44.21% 51.49%

47.16%

62.73%

49.49%

15.26% 13.55% 8.81% 6.30%

14 banks Nov 2009

20 banks

Feb 2010 13

banks Autumn

2010

15 banks

end 2010

14 banks –

Nov 2009

13 banks Feb 2010

19 banks Autumn

2010

19 banks end 2010

Banks with neutral/unclear policy/capacity

7 banks Nov 2009

7 banks Feb

2010

7 banks Autumn

2010 5 banks

end 2010

Banks with reduced lending capacity

Banks with lending capacity

Conclusions

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What is required for a) The newbuilding industry

b) Owners c) The overall shipping industry

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Ship finance and the Ship building industry · China Exim* Unicredit SMBC* Bremer Landesbank...

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